Produced by: Sina Finance Listed Company Research Institute Author: Hao As the annual 315 approaches again, car quality issues have once again become the focus of market attention, and SAIC’s Zhiji has become one of the biggest losers among domestic car companies this year due to frequent quality problems. As the “Number One Project” of SAIC Group, Zhiji’s monthly sales have been hovering around one to two thousand units for a long time, and it has been unable to break into the mainstream brands until the end of 2023, when it finally had its own shining moment, with monthly sales exceeding ten thousand units for the first time. However, the increase in sales has brought about a concentrated outbreak of quality problems, with a large number of complaints and car owners’ criticisms flooding the Internet, causing the brand reputation of Zhiji to rapidly collapse at the beginning of this year. The company’s CEO Liu Tao and other executives had to publicly apologize, a clear indication of the severity of the quality problems. But the apology did not in any way earn the trust of the users. In January of this year, Zhiji’s car sales dropped to 5001 units, a 52% decrease compared to the previous month, and further plummeted to 2000 units in February, an over 80% drop in two months. The main sales model, LS6, had a disastrous sales performance just three months after its launch. In fact, Zhiji not only has issues with vehicle equipment noise and easy damage that affect driving comfort, but also serious safety problems such as brake failure and loss of control and skidding, which occur from time to time. The hidden dangers that touch the safety red line are even more unsettling and are unacceptable to consumers. After the failure of all three models, Zhiji is now pinning its hopes on the revamped new model L7. However, considering that L7 has previously had safety issues, it may still be difficult to regain market trust through “price reduction and increased configuration.” Quality issues have erupted, and executive apologies have been in vain as sales have plummeted by more than 80% in two months. Zhiji Automobile was jointly created by SAIC Group, Alibaba, and Zhangjiang Hi-Tech, and serves as SAIC’s “number one project,” driving the group’s accelerated transition to new energy. However, the L7 and LS7 launched by Zhiji Automobile after its establishment were both unsuccessful, with monthly sales lingering between one to two thousand units, outside of the top new forces in the industry, until the launch of the LS6. In October 2023, the LS6 began deliveries, relying on high-performance chips, high-precision LiDAR, and other high-tech configurations, as well as a spacious car body and a lower price of over 200,000 RMB. With its outstanding cost performance, the LS6 quickly became the sales leader for Zhiji Automobile, and in December of last year, sales surged to over ten thousand units. However, as sales increased, quality issues with the car began to emerge. At the beginning of this year, just over two months after the LS6 began deliveries, a large number of Zhiji LS6 car owners began to complain online about faults such as the main interface not displaying vehicle information, the audio-visual system failing, the radar not alerting, the air conditioning failing, and abnormal vehicle noises, affecting normal travel. The LS6 is not the only model that has received a large number of complaints. Using the complaint information from the car quality network as an example, the Zhiji L7 and LS7 also have many quality issues such as rearview mirror adjustment without memory, door and window adjustment failure, tire pressure monitoring failure, glass cracking, abnormal noise, etc.
Due to a sudden outbreak of quality issues, company co-CEO Liu Tao responded on Weibo on January 3 and publicly apologized, saying, “Recently, some vehicles have experienced problems with missing display screen information and reverse warning sounds, causing inconvenience and trouble. On behalf of Zhiji Automobile, I deeply apologize to the users.” Zhiji IMOS responsible person also made a public apology.
However, the apology did not gain the trust of the users. In January of this year, the sales of Zhiqi cars dropped to 5001 units, a 52% decrease from the 10412 units in December 2023, and further dropped to 2000 units in February, an 81% decline in just two months. As the main model of Zhiqi, the LS6’s sales collapsed after only 3 months on the market, and its glory moment was short-lived.
Safety hazards frequently touch the red line, new car price reductions and additional features are difficult to restore consumer confidence. In fact, Zhiji cars not only have issues such as abnormal vehicle equipment and easy damage that affect comfort, but also serious safety issues such as brake failure and loss of control and skidding that frequently occur. On February 21 of this year, a car owner complained on the Car Quality Network that “the collision warning and active braking of the Zhiji LS6 are not available.” The car owner stated that he purchased the LS6 2023 Max long-range version in December 2023, and since then, the collision warning system has been malfunctioning. Despite multiple visits for inspection, the service attitude was extremely poor, and the problem had not been resolved by the time of the complaint.
In February of this year, a L7 car owner complained on the car quality website, “The vehicle was driving normally, without going uphill, suddenly skidded and lost control without accelerating or braking, and collided with oncoming traffic.” The car owner also added, “This situation has occurred twice before, and the official said it was a setting problem, but this time, even after following the official setting, the skidding still occurred. After communicating with the official, they refused to take responsibility, citing normal backend data.”
If the general quality issues only affect the daily user experience, then frequent safety hazards touch the consumers’ bottom line, making it unacceptable. Sales plummeted in a short period of time, as the market “votes with its feet.” After the failure of three existing models, Zhiji is now pinning its hopes on the new version of the L7. On February 24th, the “smart new luxury” Zhiji L7 was officially launched. Public information shows that the new L7 series not only comes standard with over a hundred intelligent luxury configurations, but also has a competitive price range of 29.99-41.99 million yuan, compared to the previous 33.88-57.88 million yuan. However, considering the previous safety issues with the L7, it may still be difficult to regain market trust through “price reduction and increased configurations” alone. It is worth mentioning that on March 1st, Zhiji Motors just announced that it has received 8 billion yuan in Series B equity financing. However, financing can only “extend the life” of Zhiji, and cannot fundamentally solve the problems of product competitiveness and brand reputation. How to escape the dilemma of “launching one failed car after another” is the urgent problem that Zhiji, and even SAIC, need to solve.